Popular, Inc. Announces Fourth Quarter 2024 Financial Results

• Net income of $177.8 million in Q4 2024, compared to net income of $155.3 million in Q3 2024.
• Net income of $614.2 million for the year 2024, compared to net income of $541.3 million for the year 2023. Excluding expenses incurred in connection with the FDIC Special Assessment and prior period tax withholdings, the adjusted net income for 2024 was $646.1 million, compared to $586.6 million in 2023, which also excluded FDIC Special Assessment expenses.
• Net interest income of $590.8 million in Q4 2024, an increase of $18.3 million when compared to Q3 2024.
• Net interest margin of 3.35% in Q4 2024, compared to 3.24% in Q3 2024; net interest margin on a taxable equivalent basis of 3.62% in Q4 2024, compared to 3.47% in Q3 2024.
• Non-interest income of $164.7 million in Q4 2024, compared to $164.1 million in Q3 2024.
• Operating expenses amounted to $467.6 million in Q4 2024, flat when compared to Q3 2024.
• Credit quality metrics remained stable:
  • Non-performing loans held-in-portfolio ("NPLs") decreased by $10.6 million from Q3 2024; NPLs to loans ratio decreased five basis points to 0.95%;
  • Net charge-offs ("NCOs") increased by $8.9 million from Q3 2024; annualized NCOs to average loans held-in-portfolio ("NCO Ratio") at 0.74% vs. 0.65% in Q3 2024. For the year 2024, the NCO Ratio was 0.68% vs. 0.44% in 2023;
  • Allowance for credit losses ("ACL") to loans held-in-portfolio at 2.01% vs. 2.06% in Q3 2024; and
  • ACL to NPLs at 212.7% vs. 206.0% in Q3 2024.
• Money market and investment securities increased by $814.8 million from Q3 2024; average quarterly balances decreased by $1.0 billion.
• Loans in the portfolio, excluding loans held-for-sale, amounted to $37.1 billion, up $912.7 million from Q3 2024; average quarterly loan balances higher by $781.0 million.
• Deposit balances amounted to $64.9 billion, an increase of $1.2 billion from Q3 2024; average quarterly deposit balances lower by $295.0 million.
• Capital actions during 2024 included the repurchase of 2,256,420 shares of common stock for $217.3 million, at an average price of $96.32 per share, under a common stock repurchase authorization of up to $500 million announced in Q3 2024, as well as an increase in the Corporation's quarterly common stock dividend from $0.62 to $0.70 per share, commencing with the dividend declared in the fourth quarter of 2024.
• Common Equity Tier 1 ratio of 16.03%, Common Equity per share of $79.71 and Tangible Book Value per share of $68.16 at December 31, 2024, a decrease of $0.88 per share from Q3 2024.

Popular, Inc. (the "Corporation," "Popular," "we," "us," "our") (NASDAQ:BPOP) reported net income of $177.8 million for the quarter ended December 31, 2024, compared to net income of $155.3 million for the quarter ended September 30, 2024.

Ignacio Alvarez, Chief Executive Officer, said: "Our financial results for the fourth quarter were solid, with net income of $178 million. We achieved strong loan growth and continued to increase our net interest income and net interest margin.

We closed the year on a strong footing, continuing our positive earnings trajectory with a 10% increase in our adjusted net income.

Our strong capital and liquidity position allowed us to recommence share buybacks and increase our dividend during 2024.

We are also pleased by the acceleration in the pace of our Transformation, which is already generating tangible results. We are making meaningful progress in the modernization of our customer channels and enhancement of our customers' experience.

I am thankful for our employees' hard work and dedication throughout the year and optimistic about our prospects for 2025 as we continue to leverage the improved performance of the Puerto Rico economy and the strength of our franchise."

Non-GAAP Financial Measures

This press release contains financial information prepared under accounting principles generally accepted in the United States ("U.S. GAAP") and non-GAAP financial measures. Management uses non-GAAP financial measures when these measures provide more meaningful information about the underlying performance of the Corporation's ongoing operations. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

Net Interest Income on a Taxable Equivalent Basis

Net interest income, on a taxable equivalent basis, is presented with its different components in Tables D, E and F. Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this measure provides meaningful information since it facilitates the comparison of revenues arising from taxable and tax-exempt sources.

Tangible Common Equity

Tangible common equity, the tangible common equity ratio, tangible assets and tangible book value per common share are non-GAAP financial measures. The tangible common equity ratio and tangible book value per common share are commonly used by banks and analysts in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method for mergers and acquisitions. Neither tangible common equity nor tangible assets or related measures should be used in isolation or as a substitute for stockholders' equity, total assets or any other measure calculated in accordance with GAAP.

Refer to Table R for a reconciliation of total stockholders' equity to tangible common equity and total assets to tangible assets.

Adjusted net income

In addition to analyzing the Corporation's results on a reported basis, management monitors the "Adjusted net income" of the Corporation and excludes the impact of certain transactions on the results of its operations. Management believes that the "Adjusted net income" provides meaningful information about the underlying performance of the Corporation's ongoing operations. The "Adjusted net income" is a non-GAAP financial measure. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

The following tables present the reconciliation of the net income to the adjusted net income (non-GAAP) for the years ended December 31, 2024 and December 31, 2023. There were no adjustments to net income for the quarters ended December 31, 2024 and September 30, 2024.

Net interest income and net interest income on a taxable equivalent basis (non-GAAP )

The Corporation's net interest income for the fourth quarter of 2024 was $590.8 million, an increase of $18.3 million compared to $572.5 million in the previous quarter. The net interest margin for the quarter was 3.35%, compared to 3.24% in the third quarter of 2024, an increase of 11 basis points.

Net Interest Income and Net Interest Margin Taxable Equivalent (Non-GAAP)

Net interest income on a taxable equivalent basis for the fourth quarter of 2024 was $638.5 million, compared to $612.9 million in the previous quarter, an increase of $25.6 million. Net interest margin on a taxable equivalent basis for the fourth quarter of 2024 was 3.62%, an increase of 15 basis points.

The increase in the taxable equivalent adjustment, quarter over quarter, was driven by a reduction in the cost of deposits while the yield of tax-exempt assets during the period remained flat.

The main drivers of the net interest income increase on a taxable equivalent basis were:

• lower interest expense on deposit accounts during the fourth quarter by $35.3 million, mainly associated with reductions in market-linked P.R. Government deposit accounts and the repricing across most of the other deposit products in response to declining short-term interest rates which resulted in lower costs of interest-bearing deposits by 27 basis points; and
• higher interest income from loans by $10.6 million driven by higher volumes across most loan portfolios, partially offset by lower yields by 5 basis points;

partially offset by:

• lower interest income from money market investments and investment securities by $16.8 million or 63 basis points; and
• lower income from investment securities by $4.2 million, due to lower reinvestment activity resulting from an increase in loan volumes.

Net Interest Income and Net Interest Margin (Banco Popular de Puerto Rico Segment)

For the Banco Popular de Puerto Rico ("BPPR") segment, net interest income for the fourth quarter of 2024 amounted to $506.9 million, an increase of $18.9 million from the previous quarter. Net interest margin increased by 15 basis points to 3.56%. Net interest income for the quarter improved due to a 29-basis point reduction in deposit costs at BPPR, despite lower volumes of earning assets at lower yields. The reduction of average earning assets in BPPR is tied to a decrease in volume of low-cost deposits. During the quarter, total average deposits were lower by $231.7 million, including lower P.R. Government deposits by $125.7 million. The reduction of earning assets yields of six basis points during the fourth quarter of 2024, follow the re-pricing of money market investments and adjustable-rate loans due to recent Federal Open Market Committee (FOMC) federal funds rate declines of 50 basis points in the third quarter and 25 basis points in the fourth quarter of 2024.

Factors impacting net interest income for the BPPR segment include:

• lower interest expense on deposit accounts by $30.7 million, mainly driven by a $27.4 million decrease in the cost of P.R. Government deposits. Total cost of interest-bearing deposits for the BPPR segment decreased by 29 basis points from the previous quarter to 2.26%, including a reduction in the cost of P.R. Government deposits of 56 basis points. Total deposits cost, including demand deposits, decreased by 22 basis points to 1.67% compared to 1.89% in the third quarter of 2024; and
• higher interest income from loans by $8.8 million, primarily from higher average balances in commercial, auto, and mortgage loans, offset in part by lower yields in the commercial, construction and credit card portfolios which include variable rate loans;

partially offset by:

• lower interest income from investments in securities and money market investments by $11.0 million and $10.0 million, respectively, driven by lower yields resulting from changes in federal funds rates, and lower average balances due to higher volume of loans and lower volume of deposits.

Net Interest Income and Net Interest Margin (Popular Bank Segment)

In the Popular Bank ("PB", or "Popular U.S.") segment, net interest income was $92.2 million, $1.0 million lower when compared to the previous quarter. Net interest margin decreased by 2 basis points to 2.71%.

Main variances in Popular U.S include:

• lower interest income from money markets by $6.7 million due to lower volumes, driven in part by higher loan balances, and lower yields;

partially offset by:

• lower interest expense on deposit accounts by $4.7 million driven by a decrease in deposit costs as a result of recent market repricing and lower volumes in high-cost interest bearing deposit accounts such as online savings and time deposit accounts and wholesale deposits. Average deposit balances during the quarter were lower by $32.7 million. During the fourth quarter, total cost of interest-bearing deposits decreased 17 basis points to 3.63%, while total cost of deposits decreased 15 basis points to 3.20%; and
• higher income from loans by $0.4 million mainly due to higher volumes in the commercial and construction loan portfolios, partially offset by lower yields, mainly in the construction portfolio that is tied to the prime lending rate.

Refer to tables D, E and F for more details on the components of net interest income and net interest margin taxable equivalent.

Non-interest income

Non-interest income amounted to $164.7 million for the quarter ended December 31, 2024, an increase of $0.6 million when compared to $164.1 million for the quarter ended September 30, 2024. The variance in non-interest income was primarily due to higher income from mortgage banking activities by $3.6 million, mainly due to a favorable variance in the fair value adjustment of mortgage servicing rights ("MSRs") driven by higher escrow float earnings and lower prepayment speed, partially offset by lower income in equity securities by $1.9 million, mainly due to lower valuation of securities held for deferred benefit plans, which have an offsetting effect in personnel costs.

Effective December 1, 2024, Popular Auto LLC, a wholly-owned subsidiary of Banco Popular de Puerto Rico, completed the sale of its daily car rental business. Daily rental car units and other related assets totaling approximately $52.1 million in book value were transferred to the purchaser at closing at near book value. Daily rental revenue, presented as part of Other Operating Income in the accompanying Consolidated Statements of Operation, for the quarter ended December 31, 2024 amounted to $3.2 million, a decrease of $1.8 million compared to the quarter ended September 30, 2024.

Refer to Table B for further details.

Operating expenses

Operating expenses for the fourth quarter of 2024 totaled $467.6 million, an increase of $0.3 million when compared to the third quarter of 2024. The variance in operating expenses was driven primarily by:

• higher professional fees by $5.7 million mainly due to consulting fees related to corporate initiatives and IT projects;
• higher business promotion expense by $4.2 million mainly due to seasonal projects and higher donations granted during the quarter; and
• higher personnel costs by $3.9 million mainly due to higher incentive compensation by $3.4 million and higher health insurance costs by $1.4 million; partially offset by a $1.4 million decrease in other personnel costs, mainly related to the valuation of equity securities held for deferred compensation plans, which have an offsetting effect in equity securities income.

partially offset by:

• lower technology and software expenses by $7.1 million, mainly due to IT projects which have reached the development stage and whose related costs are capitalized;
• lower equipment expense by $4.5 million, mainly due to a decrease in daily rental vehicle fleet depreciation as a result of the vehicles sold as part of the daily car rental business transaction; and
• higher other real estate volume of other real estate owned (OREO) income by $1.7 million due to higher volume of units sold and higher gains on sale per unit;

Full-time equivalent employees were 9,231 as of December 31, 2024, compared to 9,246 as of September 30, 2024.

For a breakdown of operating expenses by category refer to Table B.

Income taxes

For the quarter ended December 31, 2024, the Corporation recorded an income tax expense of $43.9 million, compared to an income tax expense of $42.5 million for the previous quarter.

The effective tax rate ("ETR") for the fourth quarter of 2024 was 19.8%, compared to 21.5% for the previous quarter. The ETR for the year ended December 31, 2024 was 22.9% compared to 19.9% for the previous year. The ETR of the Corporation is impacted by the composition and source of its taxable income. Excluding the impact of the FDIC Special Assessment and the prior period tax withholding adjustment, the ETR for the year ended 2024 was 20.9%, compared to 21.5% for the year ended 2023.

Credit Quality

The Corporation's credit quality metrics remained stable in the fourth quarter of 2024 when compared to the previous quarter, with NPLs, NCOs and inflows to NPLs below historical averages. The auto loans and credit cards portfolios continued to show increases in delinquencies and NCOs, while the mortgage and commercial portfolios continued to operate with strong credit quality trends. The Corporation continues to actively monitor changes in the macroeconomic environment and borrower performance given higher interest rates and inflationary pressures. Management believes that the improvements over recent years in risk management practices and the overall risk profile of the Corporation's loan portfolio positions the Corporation to continue to operate successfully in the current environment.

The following presents credit quality results for the fourth quarter of 2024:

Non-Performing Loans and Net Charge Offs

Total NPLs decreased by $10.6 million compared to the previous quarter. Excluding consumer loans, inflows of NPLs held-in-the-portfolio increased by $1.9 million in the fourth quarter of 2024. The ratio of NPLs to total loans held in the portfolio was 0.95% for the fourth quarter of 2024, compared to 1.0% for the previous quarter. The drivers of these changes were:

• In the BPPR segment, NPLs increased by $3.3 million, mainly driven by higher auto loans and leases NPLs by $4.0 million and $2.2 million, respectively, offset in part by lower commercial NPLs by $2.7 million. Excluding consumer loans, inflows to NPLs in the BPPR segment increased by $11.0 million compared to the previous quarter, mostly related to higher mortgage inflows.
• In the PB segment, NPLs decreased by $13.9 million driven by a $17.3 million commercial loan sale. Inflows to NPLs, excluding consumer loans, decreased by $9.1 million, driven by lower mortgage inflows by $15.8 million, as the prior quarter included the impact of a $17.1 million single mortgage relationship, offset in part by higher commercial inflows by $6.6 million.

Total NCOs of $67.4 million, increased by $8.9 million when compared to the third quarter of 2024. The Corporation's ratio of annualized NCOs to average loans held-in-portfolio for the fourth quarter was 0.74%, compared to 0.65% in the third quarter of 2024. For the year 2024, the NCOs ratio was 0.68% or 24 bps higher than for the year ended December 2023. The drivers of these changes for the quarter are mainly related to the following:

• In the BPPR segment, NCOs increased by $8.0 million quarter-over-quarter, mainly driven by higher consumer NCOs by $5.7 million and lower recoveries in the mortgage portfolio by $2.0 million.
• In the PB segment, NCOs remained flat quarter-over-quarter.

Refer to Table N for further information on NCOs and related ratios.

Other Real Estate Owned Properties ("OREO")

As of December 31, 2024, the Corporation's OREO portfolio amounted to $57.3 million, a decrease of $5.8 million when compared to the third quarter of 2024. The decrease in OREO assets was driven by the sale of residential OREO properties in the BPPR segment.

Refer to Table L for additional information and related ratios.

Allowance for Credit Losses ("ACL") and Provision for Credit Losses ("PCL")

The ACL as of December 31, 2024 amounted to $746.0 million, an increase of $1.7 million when compared to the third quarter of 2024.

In the BPPR segment, the ACL increased by $4.5 million driven by an increase of $10.7 million in reserves for consumer loans, in part offset by a $6.1 million decrease in reserves for commercial loans. The increase in consumer loans reserves was due mainly to changes in the credit quality of the auto and credit cards portfolios, while the decrease in the reserve for commercial loans was mainly prompted by the implementation of a new model for commercial real estate ("CRE") non-owner-occupied loans in Puerto Rico. Continued strength in the Puerto Rico labor market and stable credit metrics for this portfolio contributed to the reduction in reserves.

In the PB segment, the ACL decreased by $2.8 million from the previous quarter, mainly due to improvements in risk ratings of certain commercial relationships.

The Corporation's ratio of the ACL to loans held-in-portfolio was 2.01% in the fourth quarter of 2024, compared to 2.06% in the previous quarter. The ratio of the ACL to NPLs held-in-portfolio was 212.7%, compared to 206.0% in the previous quarter.

The provision for loan losses for the loan and lease portfolios for the fourth quarter of 2024 was $69.1 million, compared to $72.8 million in the previous quarter. The provision for loan losses for the BPPR segment amounted to $67.1 million, compared to $77.2 million in the previous quarter. This reduction was mainly driven by lower provision expense for commercial loans, in part due to the implementation of a new model for CRE non-owner-occupied-loans, partially offset by higher provision expense for the consumer portfolios. The provision for loan losses for the PB segment amounted to $2.0 million, compared to a release of $4.4 million in the prior quarter.

The provision for loan losses for the loan and lease portfolios, along with the $2.9 million reserve release related to unfunded loan commitments and the $0.1 million reserve release for the Corporation's investment portfolio for the fourth quarter of 2024, are consolidated and shown together under the provision for credit losses in our Consolidated Statement of Operations. For the fourth quarter, the provision for credit losses amounted to $66.1 million, compared to $71.4 million in the previous quarter.

Total assets amounted to $73.0 billion at December 31, 2024, an increase of $1.7 billion from the third quarter of 2024, driven by:

• an increase in securities available-for-sale ("AFS") of $1.1 billion, mainly due to an increase in investments in U.S. Treasury bills, partially offset by maturities and principal paydowns and unfavorable changes in the fair value of debt securities; and
• an increase in loans held-in-portfolio by $912.7 million, driven by an increase of $453.6 million in BPPR across all portfolios, particularly commercial and mortgage loans, and an increase of $459.1 million in PB, mainly in the commercial and construction portfolios;

partially offset by:

• a decrease in money market investments of $149.8 million, mainly driven by the deployment of funds to support loan growth; and
• a decrease in securities held-to-maturity ("HTM") of $107.2 million driven by maturities, partially offset by the amortization of $45.8 million of the discount related to U.S. Treasury securities previously reclassified from AFS to HTM.

Total liabilities increased by $1.9 billion from the third quarter of 2024, driven by:

• an increase of $1.2 billion in deposits, driven by:
  • higher deposits balances at BPPR of $1.3 billion due to increases in P.R. Government deposits by $747.6 million and in non-P.R. Government deposits by $601.4 million, which include deposits held in trust for debt service payments made in January 2025; and
  • lower deposits balances at PB of $187.1 million, mainly in interest bearing accounts, including deposits gathered through direct online channels;
• an increase in other liabilities of $481.5 million, mainly driven by $495.1 million in unsettled trade payables related to U.S. Treasury securities purchased during the fourth quarter of 2024, which were settled in the first quarter of 2025; and
• an increase in other short-term borrowings of $225.0 million, due to FHLB advances in PB.

Stockholders' equity decreased by $177.4 million from the third quarter of 2024 mainly due to the change in the accumulated other comprehensive loss driven by the increase in net unrealized losses in the portfolio of AFS securities of $197.7 million, an increase in Treasury Stock of $159.1 million due to common stock repurchases, and the common and preferred dividends declared during the quarter of $49.9 million, partially offset by the amortization of unrealized losses from securities previously reclassified to HTM of $36.6 million, net of tax, a pension liability adjustment of $16.4 million, coupled with the quarter's net income of $177.8 million. As of December 31, 2024, Popular has repurchased 2,256,420 shares of common stock for $217.3 million as part of the previously announced common stock repurchase authorization.

Common Equity Tier 1 ratio ("CET1"), common equity per share and tangible book value per share were 16.03%, $79.71 and $68.16 respectively, at December 31, 2024, compared to 16.42%, $80.35 and $69.04, respectively, at September 30, 2024. Refer to Table A for capital ratios.

Refer to Table C for the Statements of Financial Condition.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including without limitation those regarding Popular's business, financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future performance, are based on management's current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation's control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include, without limitation, the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes (including on our cost of deposits), our ability to attract deposits and grow our loan portfolio, capital market conditions, capital adequacy and liquidity, the effect of legal and regulatory proceedings, new regulatory requirements or accounting standards on the Corporation's financial condition and results of operations, the occurrence of unforeseen or catastrophic events, including extreme weather events, pandemics, man-made disasters or acts of violence or war, as well as actions taken by governmental authorities in response thereto, and the direct and indirect impact of such events on Popular, our customers, service providers and third parties. Other potential factors include Popular's ability to successfully execute its transformation initiative, including, but not limited to, achieving projected earnings, efficiencies and return on tangible common equity and accurately anticipating costs and expenses associated therewith, imposition of additional or special FDIC assessments, changes to regulatory capital, liquidity and resolution-related requirements applicable to financial institutions in response to recent developments affecting the banking sector and the impact of bank failures or adverse developments at other banks and related negative media coverage of the banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks. All statements contained herein that are not clearly historical in nature, are forward-looking, and the words "anticipate," "believe," "continues," "expect," "estimate," "intend," "project" and similar expressions, and future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, are generally intended to identify forward-looking statements.

More information on the risks and important factors that could affect the Corporation's future results and financial condition is included in our Form 10-K for the year ended December 31, 2023, our Form 10-Q for the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024 and in the Form 10-K for the year ended December 31, 2024, to be filed with the Securities and Exchange Commission. Our filings are available on the Corporation's website (www.popular.com) and on the Securities and Exchange Commission website (www.sec.gov). The Corporation assumes no obligation to update or revise any forward-looking statements or information which speak as of their respective dates.

About Popular, Inc.

Popular, Inc. (NASDAQ:BPOP) is the leading financial institution in Puerto Rico, by both assets and deposits, and ranks among the top 50 U.S. bank holding companies by assets. Founded in 1893, Banco Popular de Puerto Rico, Popular's principal subsidiary, provides retail, mortgage and commercial banking services in Puerto Rico and the U.S. Virgin Islands. Popular also offers in Puerto Rico auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the mainland United States, Popular provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank, which has branches located in New York, New Jersey and Florida.

Conference Call

Popular will hold a conference call to discuss its financial results today, Tuesday, January 28, 2025 at 10:00 a.m. Eastern Time. The call will be broadcast live over the Internet and can be accessed through the Investor Relations section of the Corporation's website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 1-833-470-1428 (Toll Free) or 1-404-975-4839 (Local). The dial-in access code is 200257.

A replay of the webcast will be archived in Popular's website. A telephone replay will be available one hour after the end of the conference call through Thursday, February 27, 2025. The replay dial in is: 1-866-813-9403 or 1-929-458-6194. The replay passcode is 527575.

An electronic version of this press release can be found at the Corporation's website: www.popular.com.